Writing in Forbes, 22-year Wall Street veteran Caitlin Long said that ICE’s recent announcement on its new cryptocurrency market is a “double-edged sword”. That’s because “it’s likely the beginning of Wall Street creating financial claims to bitcoin out of thin air” as opposed to being backed by actual bitcoins, which could “offset some of bitcoin’s algorithmically-enforced scarcity,” she wrote. While acknowledging a number of positives, Long noted that “if a large degree of leverage-based financialization ever happens to bitcoin, the community that secures the bitcoin network with its processing power may move on to a different currency”.

Unfortunately, the news on this front is already not good, as traders confirmed that daily liquidity for synthetic versions of bitcoin is already approximately $15 billion, which is 3x bitcoin’s daily spot liquidity of approximately $5 billion. Leverage-based financialization of bitcoin to date has happened mostly outside of the US, for example, Hong Kong-based exchange OKEx’s recent confirmation that one of its customers had major losses on a leveraged $400 million futures position, causing it to claw back $9 million from its customers to cover the exchange’s loss.

Member Login

Stay up to date with the daily movements in the securities finance industry. The DataLend Daily Equity and Fixed Income Market Updates, provides key metrics to help you identify trends and day-over-day changes in the global lender-to-borrower securities finance market.Download today’s metrics here